Alibaba Bets Big on AI and Talent with Major Investments

Chinese e-commerce and cloud computing giant Alibaba is making substantial strategic investments to cement its position in the artificial intelligence race. The company's dual-pronged approach involves a significant hardware upgrade and a large-scale employee incentive plan, signaling a clear prioritization of long-term technological leadership over short-term profitability.

The centerpiece of Alibaba's strategy is a massive expansion of its computing infrastructure. The company has placed an order for more than 40,000 MI308 accelerators from U.S. chip designer AMD. This move is aimed at reducing reliance on Nvidia's constrained H200 chips while dramatically boosting the computational power available for Alibaba's proprietary AI model development.

This hardware investment is a core component of the "Full-Stack AI" strategy being aggressively pursued by Alibaba Cloud. The division has shown strong growth, with revenue increasing by 34% year-over-year in the quarter ending September 2025. However, this expansion comes at a cost to near-term earnings. The cloud segment's EBIT margin contracted to just 2%, and net profit plummeted by 53%.

Further integrating its ecosystem, Alibaba introduced an "Agent OS" for its DingTalk B2B platform on December 24. This operating system is designed to manage AI agents, enhancing connectivity across the company's business services.

Should investors sell immediately? Or is it worth buying Alibaba?

Employee Equity Grant to Retain Key Talent

In a parallel initiative to secure human capital, Alibaba distributed 2.28 million Restricted Share Units to employees on December 23, 2025. These shares, drawn from the company's 2024 Equity Incentive Plan, will vest over a four-year period. The allocation represents approximately 0.01% of Alibaba's total share capital. An additional pool of over 403 million shares remains available for future incentive programs.

The objective of this grant is to lock in critical personnel for the long term without straining corporate liquidity. While the dilution effect for existing shareholders is minimal, the move sends a strong signal about the company's commitment to its workforce.

Market Analysts Maintain Bullish Outlook

Despite the evident pressure on margins, the broader analyst community remains largely optimistic about Alibaba's trajectory. Out of 42 analysts covering the stock, 38 have issued a buy recommendation, four maintain a neutral stance, and only one advises selling. The consensus average price target stands at $198.56, implying a potential upside of 32% from current levels. JPMorgan is even more bullish, setting a target of $230 per share.

The market's reaction to this strategic shift has been measured so far. Institutional investors, however, continue to engage. Strong Tower Advisory Services, for instance, increased its position by 6.2% in the third quarter, while other major funds are continuously adjusting their holdings. The underlying bet appears to be that growth driven by technological leadership will ultimately outweigh short-term profit optimization.